by Calculated Risk on 2/20/2006 06:52:00 PM

Forbes reports: Trichet says market expectations for ECB rate hike are 'reasonable'

European Central Bank president Jean-Claude Trichet reiterated that market expectations for an ECB interest rate hike are 'reasonable'.

The ECB is widely expected to raise its main refinancing rate to 2.50 pct from 2.25 pct at its next meeting on March 2.
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He also said that house price rises in some euro zone countries are 'not normal'.
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In its February monthly bulletin, the European Central Bank said it sees tentative signs that the euro zone housing market is becoming overvalued following recent sharp price rises in some countries.

Some recent house price rises in some euro zone regions may be unsustainable, it said.

Trichet told the committee that the real estate sector is important for the ECB and one of the parameters that it considers when taking interest rate decisions.

And he said it is important to 'avoid further inflation of the bubble' in some euro zone housing markets.

Its interesting that Trichet commented on real estate being important with regards to interest rate decisions. I'm not sure if he is talking about targeting asset prices, or just that the real estate sector is an important part of the economy.